Avg Hold Definition

Avg Hold is also known as the average holding time.  

The holding time is the length of time that the trade is open.   The average is taken across all the trades which resulted from backtesting a particular strategy.

The average holding time is measured on the same scale as the chart time scale.    Since I am backtesting on daily charts, the avg hold is measured in days.

Extra Insight:

When backtesting a strategy, its useful to know the average holding time of all the trades made by that strategy.   This gives an idea of how long the funds are needed – on average — for each trade.   It also gives some insight into the type of trader that might like the strategy.

All else being equal, the trading strategy with the smallest average hold time is best.   Not all things are equal in practice though.   People may seek out longer or shorter hold times based on their temperment, tax situation, global market views, margin, and a host of other factors.   The average hold time gives insight into which strategies will fit these other requirements.  I also use it to classify different strategies and compare those with similar hold times.

Last updated 11/11/08.

Tags: avg hold, backtesting, productivity